The Trump administration took a hard line on shrinking the U.S. trade deficit with Canada and Mexico as the third round of negotiations on rewriting the North American free-trade agreement concluded in Ottawa on Wednesday with little substantive progress.
Washington's unshakeable focus on reducing its trade deficit in the NAFTA talks was immediately challenged by Foreign Affairs Minister Chrystia Freeland and her Mexican counterpart, and suggests the outcome of the negotiations is far from clear.
"We never said this would be easy," Ms. Freeland said after hosting her ministerial counterparts. "Canada does not share the view that deficits or surpluses are the best way or even a particularly good way of measuring the way a trade deal works."
Ms. Freeland would not say whether the U.S. stand on trade deficits and protectionist measures against aircraft manufacturer Bombardier Inc. and Canadian softwood lumber are signs the Americans want to dissolve NAFTA, as Donald Trump vowed to do during his presidential election campaign.
That promise has loomed since talks began in Ottawa on Sunday, because U.S. negotiators have failed to table their demands on the most contentious issues, including rules of origin for automobiles and manufacturing, and changes to trade-dispute settlement mechanisms.
"I do not have the superpower that allows me to look into the heart of a counterparty and divine their true intention," Ms. Freeland told reporters when asked if the United States is serious about negotiating a new deal.
U.S. Trade Representative Robert Lighthizer certainly did not mince words at the end of five days of NAFTA talks in Ottawa, saying he wants to "reduce the trade deficit" by improving access for exporting U.S. goods to Canada and Mexico under the three-country pact.
"We are committed to a substantial renegotiation that reinvigorates U.S. industry and ensures reciprocal market access for American farmers, ranchers and businesses," Mr. Lighthizer told a news conference.
Ms. Freeland took direct aim at Mr. Lighthizer's suggestion that Canada got a better deal out of the 23-year-old NAFTA than the United States.
She reeled off figures indicating that the United States had an $8.1-billion surplus with Canada on total trilateral trade of $634.8-billion in 2016. When it comes to manufactured goods, the U.S. surplus with Canada is $34.2-billion and $9.1-billion in auto parts, she said.
"Our trade with United States is reciprocal and usually beneficial and nearly perfectly in balance," Ms. Freeland said.
Mexican Economy Minister Ildefonso Guajardo was even more blunt, likely because his country is the most threatened from Mr. Trump's insistence on making significant changes to NAFTA.
"For the next round in Washington, we will have substantial challenges to overcome," Mr. Guajardo said, warning that Mexico will not sign any deal that puts it at a disadvantage.
The U.S. trade deficit with Mexico is $64.3-billion (U.S.) – a theme that Mr. Trump emphasized throughout the campaign, particularly in his calls to stop U.S. auto giants from moving plants and jobs south of the border.
"NAFTA represents more than just the trade figures and numbers," Mr. Guajardo said. "NAFTA represents the commitment that we share to make North America the most competitive region in the world. But let me clear: That view requires from us to increase our trade opportunities and not to diminish them."
The next round of NAFTA talks, in Washington from Oct. 11 to 15, will likely be more difficult.
"It is true on some of the hardest issues, proposals have not been tabled, so we haven't gotten to those," Ms. Freeland said.
The United States is expected to table proposals for rules of origin for automobiles and auto parts that will call for higher U.S. and North American content to qualify for duty-free access, and to reform dispute-settlement mechanisms to favour U.S. businesses.
Those talks are also expected to focus on rules in NAFTA's Chapter 19 for settling disputes between members. Canada could use those rules to challenge the Bombardier decision, and it has threatened to walk away from the talks if the United States tries to eliminate Chapter 19.
On Tuesday, the U.S. Commerce Department imposed duties of nearly 220 per cent on Montreal-based Bombardier's C Series jets. It followed an earlier ruling against Canadian softwood lumber.
Ms. Freeland objected to the Bombardier decision in bilateral talks with Mr. Lightizer, but said the dispute would not affect the NAFTA talks.
"This is familiar and accustomed behaviour," she said, referring to U.S. Commerce decisions against Canadian softwood lumber and Europe's Airbus jets. "These Commerce rulings are quite separate from our NAFTA modernization negotiations."
Mr. Lightizer told Reuters that the U.S. decision on Bombardier has not been finalized.
"There are several more stages. We don't even know whether it is going to be successful, and in addition there are off-ramps in the litigation," he said. "It's too early to tell."
Asked whether the dispute could affect NAFTA talks, Mr. Lighthizer said: "I'm not saying it doesn't have an effect on relationships – it does, but not on this negotiation."
The talks in Ottawa produced little other than a chapter to help small businesses learn how to gain access to the markets of all three NAFTA countries.
However, Ms. Freeland said negotiators made "meaningful advances" in telecommunications, digital trade, good regulatory practices and customs and trade facilitation.
The three countries are rushing to finish talks by February, 2018, before Mexico's presidential election and U.S. congressional mid-term votes, even though trade experts call the deadline impossible.